Confusion over if and when the Irish bailout will occur, has caused the euro to extend its losses from last week in overnight trading. Against the USD, the 16-nation currency dropped as low as 1.3126 before staging a minor comeback. Currently the pair is trading around the 1.3150 level. Whether or not the euro will be able to recoup its recent losses will largely depend on news out of the euro-zone.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3222 | 1.5545 | 84.36 | 0.9728 | 0.9940 | 0.8527 |
| 1.3199 | 1.5527 | 84.15 | 0.9707 | 0.9908 | 0.8510 | |
| 1.3192 | 1.5518 | 84.03 | 0.9692 | 0.9896 | 0.8502 | |
| Support | 1.3170 | 1.5500 | 83.82 | 0.9671 | 0.9864 | 0.8485 |
| 1.3155 | 1.5491 | 83.72 | 0.9664 | 0.9843 | 0.8475 | |
| 1.3133 | 1.5473 | 83.51 | 0.9642 | 0.9810 | 0.8458 |
Economic News
USD – Dollar Sees Modest Gains Ahead of Slow News Day
The US dollar saw some small gains in overnight trading, ahead of what promises to be a low liquidity situation in the marketplace. Since markets opened for the week, the greenback saw a 50 pip jump against the UK pound before a correction was staged. Currently the GBP/USD pair is trading at the 1.5513 level, compared to 1.5534 when markets opened last night. Analysts attribute the dollar’s gains to risk aversion among investors who are still unsure of the planned euro-zone bailout of Ireland.
Today, a lack of significant news events means that dollar values will likely be determined by news out of the EU. Any mention of when and how the Irish bailout will take place will likely hurt the dollar against the euro. That being said, investors are particularly hesitant to take any substantial risks at the moment, particularly as the year comes to a close. This may be a good time to bet on the safe haven greenback.
As for the rest of the week, USD traders will have to wait until Wednesday and Thursday before any significant US news is released. On Wednesday, particular attention should be given to the US Final GDP figure while Thursday’s weekly Unemployment Claims promises to generate market volatility. Until then, news out of the euro-zone is likely to dictate dollar values.
EUR – Euro Extends Losses in Overnight Trading
Possible problems with helping Ireland overcome its debt crisis have caused investors to bet against the euro, at least for the time being. As a result, the currency has fallen against virtually all of its main currency rivals, including the dollar, yen and UK pound. The EUR/JPY has fallen some 50 pips since markets opened for the week, while the EUR/GBP has dropped over 20. Currently, the pairs are trading at 110.28 and 0.8473, respectively.
Today, in addition to any news regarding the Irish bailout, traders will also want to pay attention to the EU Current Account figure, scheduled to be released at 09:00 GMT. According to analyst’s predictions, today’s figure will likely come in significantly better than last month’s. If this is indeed the case, the euro may be able to build up some momentum and recoup some of its recent losses.
As for the rest of the week, the German Consumer Climate report on Tuesday, and the French consumer spending report on Thursday, both promise to generate some market activity among euro pairs.
JPY – Yen Sees Minor Gains Against EUR and GBP
The safe-haven yen saw some small gains against both the euro and UK pound in overnight trading, as investors remain cautious regarding the strength of the European currencies. The EUR/JPY pair has fallen close to 40 pips since markets opened, and currently stands at the 110.35 level. The GBP/JPY pair dropped a similar amount, before staging a bullish correction. Currently the pair is trading at 130.20.
Today, yen values will likely be determined by news out of the euro-zone. Should investors continue to doubt the strength of common currency, the yen is likely to continue on its upward trend.
Later in the week, traders will want to pay attention to the Japanese Trade Balance figure, scheduled to be released late on Tuesday night. A positive figure will likely give the yen a bigger advantage over its main currency rivals.
OIL – Price of Oil Drops As Investors Avoid Risk Taking
The price of crude took a slight drop in overnight trading, falling around 30 pips to its current level of 88.68. The drop can be attributed to an increase in risk aversion following the confusion regarding the Irish bailout. Typically, commodities like crude oil move up when positive news causes investors to bet on riskier assets.
That being said, the price of oil is still close to its highest point in two years. Predictions remain that another jump in price could occur, especially as the weather in the US gets colder, thereby increasing energy demand. It appears that while crude may be falling in the short term, its long term prospects are still bullish.
Technical News
EUR/USD
The Williams Percent Range on the 8-hour chart is showing the pair well into oversold territory, indicating that an upward correction may occur. In addition, it appears that a bullish cross is about to form on the daily chart’s MACD. Traders are advised to go long in their positions today.
GBP/USD
With the 8-hour chart’s Relative Strength Index currently in oversold territory, and a bullish cross forming on the daily chart’s Stochastic Slow, the pair may be due for upward movement. Now sounds like a good time to go long on this pair before the price jump occurs.
USD/JPY
Most technical indicators are showing this pair trading in neutral territory. The exception seems to be the daily chart’s MACD, which is showing that a bearish cross has formed. Still, traders will likely want to take a wait and see approach for this pair today, in order to better gauge its direction.
USD/CHF
The 8-hour chart’s Williams Percent Range shows this pair approaching overbought territory. The 4-hour chart’s Stochastic Slow has also formed a bearish cross, supporting the theory that the pair could see a downward correction. Traders are advised to go short with tight stops today.
The Wild Card
NZD/USD
Most technical indicators show this pair trading in the oversold region, indicating a bullish correction is likely to occur. This includes the Williams Percent Range on the 8-hour chart, and the Relative Strength Index on the daily chart. Forex traders may want to go long on this pair today, as an upward breach is likely to occur.
Written by Forexyard.com